Indian Mobile Number Portability to Further Increase Competitive Intensity

Published on: 18th Jan 2011

Note -- this news article is more than a year old.

Mobile Number Portability (MNP) was introduced in Haryana in December 2010 and thereafter will be introduced across India in January 2011, a move that is expected to further intensify competition in the already crowded mobile services market. In ICRA's opinion, with implementation of MNP, subscribers would get a wider choice and would be able to switch between service providers easily, thereby compelling service providers to offer competitive pricing plans and offer higher service quality to attract and retain subscribers.

In ICRA's view, direct fallout of implementation of MNP would be an
increase in customer churn.
Change in mobile number has been a major deterrent in switching service
operators in the past,
especially for high usage customers; however, with the implementation of MNP,
customers would
be able to easily switch from one service provider to another without changing
their mobile
number. Moreover, ICRA expects, the low porting charges (maximum of Rs. 19 per
porting to be
paid by the subscriber) and low porting time (7 days for all circles except
Jammu & Kashmir,
Assam and North East where the maximum time period for completing the porting
process would
be 15 days) to drive the adoption of MNP in India.

Increase in the churn is
expected to increase
the customer acquisition and retention costs of operators, which coupled with
competitive tariff
plans and falling average revenue per user (ARPUs) is expected to result in a
decline in the
operating margins of the telecom operators especially in the short term. Under
such a scenario,
telecom operators with stronger financial profile would be better placed to cope
with the increasing
competitive intensity.

In ICRA's view, as all telecom operators in the market quickly react to
match competitor pricing,
tariff may not be a differentiating factor in the choice of operator. Hence, the
quality of service and
customer experience will play an important role in a customer's choice for an
operator rather than
pricing. ICRA expects that customer retention, especially in the high paying
post-paid segment,
would become the focus area for operators, as these contribute significantly to
revenues, even if
they form a small portion of an operators overall subscriber base. Operators
would have to
increasingly focus on offering differentiated services and improving quality of
service (in terms of
better customer care and improved network and coverage) in order to attract and
retain customers.
Offering differentiated services like third generation (3G) services would also
be important for
retention of high usage high ARPU customers.

The implementation of MNP would be beneficial for mobile subscribers, as it
would provide them
with a wider choice (in terms of pricing plans, services, etc.), flexibility to
change service operators
without losing their mobile number and most likely an improvement in the quality
of services
offered by operators. However, for mobile service operators, the churn that
invariably follows MNP
implementation represents both a threat and an opportunity. Post the
implementation of MNP,
some carriers are likely to witness the erosion of their customer base and
consequently a decline
in profitability, however, for some other operators, MNP can provide an
attractive opportunity to
gain market share and target high ARPU customers.

Thus, MNP would result in higher competitive intensity that would be
reflected in an increase in
churn, pressure on ARPUs and margins in the short term and telecom operators
would have to
increase their focus on improving service quality and offering differentiated
services in order to
attract and retain subscribers in the long term. ICRA believes that, operators
with superior quality
of service would be the clear winners, while those with less than satisfactory
service quality would
stand to lose the maximum by way of subscriber churn.